Tuesday, January 29, 2008

Astute reader David V. sent in a story which he suggested was ripe with metaphoric possibilities: 19 bald eagles die in Alaska:

At least 19 bald eagles died Friday after gorging themselves on a truck full of fish waste outside a processing plant.

Fifty or more eagles swarmed into the truck, whose retractable fabric cover was open, after the truck was moved outside the plant, said Brandon Saito, a biologist with the U.S. Fish and Wildlife Service who coordinated the recovery operation.

The birds became too soiled to fly or clean themselves, and with temperatures in the mid-teens, began to succumb to the cold. Some birds became so weak they sank into the fish slime and were crushed.

The truck's contents had to be dumped onto the floor of the Ocean Beauty Seafoods plant so the birds could be retrieved. Some tried to scatter, but since they couldn't fly, wildlife officers soon retrieved them. The eagles were then cleaned with dish soap in tubs of warm water to remove the oily slime and warm them.

Could anyone dream up a more apt metaphor for the debt/real estate offal which America has gorged on the past seven years than this? Let's see: the Bald Eagle is the symbol of the U.S.A.: check. Fish waste = no-document, no down payment mortgages, check. The orgy left participants unable to escape the slime, check. Some participants weakened and were subsequently crushed, check. Government officials hurried to aid the entrapped participants in the hopes they would recover, check.

Whew. It doesn't get any better than this in Metaphor-Land. Thank you, David, for bringing this amazingly rich story to our attention.

Illness and medical metaphors are, along with war metaphors, easily overextended. (Consider the "War on Cancer," a two-fer.) Nonetheless, it is tempting to draw an analogy between the spreading debt crisis and an infection.

Not just any infection, but a special kind--the self-induced infection. Since we're stretching metaphors to the breaking point, let's run with "self-induced financial infection."

Metaphorically, here's how The global financial system managed to infect itself:

Having consumed nothing but Big Macs and Jack Daniel whiskey for a deplorably long time, Mr. GFS's (global financial system) judgment and health were already impaired when he stumbled upon an open vat of sewage-soaked, apparently "free" money. Like the ravenous eagles pitching themselves voraciously into the fish offal, Mr. GFS climbed in and gleefully cavorted in the smelly cash, ignoring his numerous open sores and abrasions and poor state of mental and physical health.

Alas, Mr. GFS eventually sneezes, then coughs, and in the first stages of multiple infections--let's say staph, pneumonia, influenza and multiple other microbal meanies--he crawls out of the oderiferous bin and whines, "I'm sick! How could this happen?"

How, indeed, when every reasonable caution was thrown to the winds of insatiable, frenzied greed and euphoria-impaired judgment?

The "self-induced infection" of miscalculated and mispriced risk, overleveraged debt and deeply underwater real estate is systemic. Although I cannot locate the source, I recently read that homeownership rates leaped throughout Europe in the housing boom. This suggests that millions of previously unqualified buyers purchased properties at the top of the market in much of the E.U., just as millions of unqualified buyers jumped into the orgy in the U.S. and Asia.

In other words, the infection is global. I have written numerous times about the empty condo buildings in China, and the government employees in China I know of firsthand who each own three or four investment condos (some rented, some empty, all leveraged). Astute reader Mega sent in this link to an excellent Britain-based site, Housepricecrash.co.uk. Similar sites can be found for Spain, Ireland, etc.

Alas, the medications being pumped into the system are only suppressing the symptoms, not the infection. Pumping in more liquidity, raising Fannie Mae loan limits, freezing mortgage rates, even switching hopelessly underwater ARMs to fixed rate loans--all of these measures skirt the primary issues: misguided risk management, plummeting bubblicious valuations and borrowers who are unable to service their loans, regardless of the tweaks being made to their debt.

The "cure" being offered is essentially the cause of the disease: more debt.

This is the "cure" which enabled Japan to enter a self-induced economic coma for most of the past 20 years. Can't service your loan? Hey, we'll rewrite it for a larger sum so you can use the difference to pay interest. Or, we'll rewrite it at a lower interest rate and arrange for a subsidiary loan from another lender that we're colluding with to hide the true nature of the debt. Or we'll set it aside in some dark, hard-to-find corner of our balance sheet for a few years, or maybe a decade.

We can safely predict the self-induced infection has not yet run its course. Housing underpins most middle-class Americans' wealth, and their collective sense of wealth. But the credit orgy extends far beyond housing, of course, and the infection is already breaking out in auto loans (and their credit-based derivatives), credit cards, commercial real estate loans, and indeed, all debt, everywhere.

Readers Journal has been updated! A wealth of new comments and ideas await you:

NOTE: contributions are humbly acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Knowel M. ($50), for your amazingly generous donation in support of this humble site. I am greatly honored by your contribution and readership. All contributors are listed below in acknowledgement of my gratitude.

Thank you, D.M.T. ($25), for your generous cash donation in support of this humble site. You did not include a full street address, and I am unable to locate your email address, so please accept this modest thank-you. I am greatly honored by your contribution and readership. All contributors are listed below in acknowledgement of my gratitude.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

Our Privacy Policy:

Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Adsense and Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative)If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.

Our Commission Policy:

Though I earn a small commission on Amazon.com books and gift certificates purchased via links on my site, I receive no fees or compensation for any other non-advertising links or content posted on my site.

Weekly Musings Reports

"What makes you a channel worth paying for? It's actually pretty simple - you possess a clarity of thought that most of us can only dream of, and a perspective that allows you to focus on the truth with laser-like precision." Jim S.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

Contribute via PayPal

Why I gratefully accept donations and why you might want to donate:

A 95-minute movie with 10 minutes of ads and a small popcorn costs $25.
If you enjoyed this site for at least 2 hours this year, and you donate $25, you already received more entertainment than you did from the movie. The other 100+ hours of enjoyment you receive here is FREE.

Subscribers and donors of $50 or more this year will receive exclusive weekly Musings Reports.

You have the immense moral satisfaction of aiding a poor dumb writer who seeks to inform, entertain and amuse you.

Contribute via Dwolla

Dwolla members can now subscribe to the weekly Musings Reports with a one-time
$50 payment; please email me,
as Dwolla does not provide me with your email: